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NYMEX Crude $ 52.98 UP $.1500
NY Harbor ULSD $1.6747 UP $.0030
NYMEX Gasoline $1.5507 UP $.0077

NEWS
Oil futures settled Tuesday at their highest level since July 2015 after an energy watchdog lifted its demand forecast for this year and predicted that planned output cuts by major oil-producing nations will stabilize prices.

January West Texas Intermediate crude tacked on 15 cents, or 0.3%, to settle at $52.98 a barrel after trading as high as $53.41. February Brent crude added 3 cents, or less than 0.1%, to $55.72 a barrel on the ICE Futures exchange in London. Prices for both WTI and Brent edged above Monday’s finish to again mark at their highest levels in about 17 months.

“A good deal of optimism has been priced into oil in recent weeks,” said Matt Smith, director of commodity research at Clipper Data. “But prices should remain supported into next year as we watch the OPEC/non-OPEC production cuts developments unfurl.” OPEC in late November agreed to slash production by 1.2 million barrels a day. Over the weekend, 11 non-OPEC countries including Russia agreed to cut their output by 558,000 barrels a day. The total sum represents almost 2% of global supply.

The market is still trying to figure out how to properly price in the OPEC deal,” Robbie Fraser, commodity analyst at Schneider Electric, told Market Watch. Oil futures had spent part of Tuesday’s session trading lower. “OPEC has a long track record of treating quotas more like a suggestion rather than a requirement, so the market is hesitant to fully price in the deal,” he said. “We know there will be cuts, but exactly how close those cuts will come to OPEC’s goal is the billion dollar question this market will be asking for the foreseeable future.”

Russia has agreed to take on about 300,000 barrels of the total non-OPEC output reduction. However, in an article published Monday, Bloomberg reported that Russian Energy Minister Alexander Novak told the news agency over the weekend that the reduction will be made gradually to reach the promised target in April or May. The output pact is set to end in June.

Monthly U.S. government data released Monday revealed that oil production from seven major U.S. shale plays is forecast to see a monthly rise—by 2,000 barrels a day to 4.542 million barrels a day in January from December. Weekly data on U.S. petroleum supplies will be released by the American Petroleum Institute late Tuesday and by the Energy Information Administration early Wednesday. Citi Futures said forecasts for the EIA report call for a decline of crude stockpiles between 1 million and 2 million barrels.

Meanwhile on Tuesday, the International Energy Agency said robust U.S. growth in the third quarter and methodological changes in China prompted it to raise its oil demand forecasts for 2016. The IEA now sees global demand growth of 1.4 million barrels a day this year, up 120,000 barrels from its previous forecast. For 2017, the agency sees growth of 1.3 million barrels a day.

The top energy watchdog said global inventories should start to shrink in the first half of 2017, given the agreement by producers inside and outside the Organization of the Petroleum Exporting Countries to cut their oil output. A world-wide supply glut is a key reason crude prices have been under selling pressure in recent years. “The deal is for six months, and we should allow time for it to be implemented before reassessing our market outlook. Success means the reinforcement of prices and revenue stability for producers after two difficult years; failure risks starting a fourth year of stock builds and a possible return to lower prices,” the Paris-based agency said in its monthly report. Analysts say if producers fully adhere to agreed quotas, the oil market could shift into a deficit. OPEC’s own calculations indicate world crude demand will hit 95.5 million barrels a day in 2017, an increase of 1.2 million barrels a day. Cutting down the supply glut will lift prices, possibly into the target range of $60-$70 per barrel, BMI Research said. But achieving that reduction will mostly hinge on getting compliance from producers that have been known to cheat in the past, the firm added. “We note that the higher the barrel price, the greater the temptation to break allocated quotas,” BMI said. In 17 production cuts since 1982, OPEC members have reduced output by an average of just 60% of their commitments, according to Goldman Sachs.

OPEC will release its monthly oil report on Wednesday.